Bill would hedge risk for construction cos.

The way businesses contract with the state would change under new bipartisan legislation, prompted by a dispute involving two Albany-area companies.

Supporters want the bill to set precedent by giving companies new assurances that they will be paid if a court nullifies a bid or contract after work has already started.

A more contentious issue colors the debate: project labor agreements, or PLAs, which the state uses in bids to steer more work to labor unions.

The bill in question carries extra importance as the state accelerates bidding on $244 million of regional roadwork – and also decides whether to use a PLA in an upcoming $145 million bid to overhaul a Hudson River bridge in Albany.

As it is, New York state is a major client for the private sector, awarding $66.5 billion of contracts last fiscal year.

“Do you go forward but risk nonpayment if a court deems a contract illegal for whatever reason? Or do you not start work because of legal action, but then risk penalties and damages for being late?” said Mark Galasso, president of Lancaster Development Inc.

The 250-person construction company is based near Cobleskill.

“There is only one way to cover that risk: Raise your price. The taxpayer ends up suffering,” he said. “From an ethical standpoint, this bill is a no-brainer.”

Galasso is a big reason the legislation is in play, after he sued the Department of Transportation over a $72 million bridge job in Orange County.

In March, a state judge sided with Galasso and his lawyers at Couch White.

The judge rebuked the state and said it illegally tainted the project by forcing bidders – including Lancaster, a non-union shop – to accept a union-friendly PLA.

Lancaster was the low bidder by a $4.5 million margin, Galasso said. But he argues the state would not give him the work because he refused to accept the union provisions, which were added to the bid less than two weeks before it was due.

The judge tossed out the contract, and ordered the state to re-bid the work. Work stopped immediately.

By then, a ribbon-cutting with U.S. congressmen had been held. A. Servidone Inc. of Rensselaer County was $22 million into the project and had not been paid, according to the legislation.

The state will not say if it is appealing. Legally, A. Servidone cannot be paid, since there is no longer a valid contract.

The situation is unusual, mirrored only by a couple of cases that occurred two decades ago, according to advocates for the bill.

But Galasso’s court win could pave the way for other court challenges of PLAs.

“It is a much bigger issue than just this contractor getting paid. It’s about precedent for the industry,” said Mike Elmendorf, head of the trade lobby Associated General Contractors of New York State.

Unions often leverage PLAs to get more members on a job, in exchange for pledging not to strike or picket. Non-union shops contend PLAs force them to adhere to union rules that drive up construction costs, preventing them from offering competitive bids.

“We’re not necessarily against PLAs per se, but we don’t believe they ought to be mandated,” Elmendorf added. “They should be optional, because if it is, you’ll really know whether you are saving any money with it.”

Union officials estimated 250 people would have worked the Orange County job, including at least 20 subcontractors. Calls to A. Servidone were not returned.

The site is near a growing medical campus, and Gunther, a registered nurse, said it is a mess these days and causing ambulance delays. Unused cement culverts fill the median along Interstate 86, she said.

Gunther is working on unified legislation with Sen. John Bonacic, a Republican from Orange County who introduced his own similar bill just days ago.

“I do support labor, first and foremost. The PLA is important to me because it guarantees a living wage and it is in-state hiring,” Gunther said. “The state of New York is onboard to pay this company. It’s a question of: Do you want to put somebody under or not?”

Even Galasso defends his competitor. He said he does not blame the company for any of the issues in his lawsuit.

“If they spent a dollar, they should be paid a dollar, with reasonable overhead and profit built in,” he said. “They are the unintended victim here.”